By common consent, US banks dominate the global custody markets - not least now that Barclays Global Securities (BGSS), one of the few remaining European contenders has been gobbled up by Morgan Stanley. But there is still one interesting exception .

The UK’s Midland Securities Services (MSS) is still very much in the world leadership race - hot on the heels of Chase, Morgan Stanley, Bankers Trust and Citibank, in that order, for new business gains. Arg-uably it is the number one custody bank in Europe, where 20% of its £390bn ($624m) worth of global custody business is in European cross-border trades, though there are others vying for this slot.

Last year MSS took fifth place to US custody banks in terms of global custody net asset gains and came third in new business gains. In the UK’s pension fund global custody market, it is ahead of the field and not least ahead of US banks. And it is ahead of any other European bank.

Figures for global custody contracts awarded by UK pension funds in 1996 reveal that MSS won some £84bn worth of net pension fund business - almost half the £170bn worth of new business awarded to custody banks and some three times more than Chase, which came second in the UK. By contrast, Lloyds and Royal Bank of Scotland did less well, each taking on less than £2.6bn worth of new custody business.

With the departure of Barclays and NatWest from global custody markets, MSS remains the only UK custody bank with truly global aspirations. It has shown that it is capable of taking on US competition and holding its own at home and abroad. First in the UK pension fund sector and fifth in the world at large for new business gains is not bad going.

In future it will be interesting to see how MSS fares against Deutsche Bank, ABN Amro and Banque Pari-bas, which are also interesting European exceptions to the continuing US dominance of the market. Not that MSS regards any European custody bank as serious competition yet, according to its head of sales John Stubbs. We don’t see Deutsche, ABN Amro or Paribas as our biggest competitors in Europe. It’s the US banks in Europe who are the greatest threat. But both Deutsche and ABN-Amro are coming on fast. They’ve come to the market later but with serious money to spend, buying the best systems and hiring new people.”

Last year Robeco in the Netherlands appointed MSS to handle its business and, in the UK MSS is a sub-custodian for most of the major European banks, including ABN Amro and Deutsche. For the Prudential in the UK, it has a £45bn global mandate, previously handled in-house, but outsourced to MSS for investment chiefly in the US and emerging markets.

Stubbs does not deny that a good number of people these days see Midland as no longer a British or European bank, since it is wholly owned by Hongkong & Shanghai Banking Corporation (HSBC) and all its dealings - logo, letterhead, visiting cards, sponsorships etc are in its parent’s house colours and style. And there can be no doubt that MSS’ global reach would be inadequate without the HSBC dimension in southeast Asia and the Far East, particularly China, Australia and New Zealand.

Even in Europe, there are only six countries in which MSS has its own branded offices - France, Italy, Spain, Sweden, Turkey and Russia - and it does not have a very visible presence elsewhere.

In the absence of its own offices and branches throughout Europe, MSS “appoints only the best”, according to Stubbs.

Its agent network includes Creditanstalt (Austria), Generale (Belgium and Luxembourg), Ceskoslovenska (Czech Republic and Slovakia), Den Danske (Denmark), Postipankki (Finland), Indosuez (France), Dresdner (Germany), National Bank (Greece), Allied Irish (Ireland), Banca Commerciale (It-aly), ABN Amro (Netherlands), Den norske (Norway), Handlowy Wars-zawie (Poland), Espirito Santo Commercial Lisboa (Portugal), ING (Russia), Skandinaviska Enskilda (Sweden) and UBS (Switzerland).

Interestingly, Deutsche, which is a main contender in the global custody race, uses MSS in the UK, but it is not used in return in Germany, where Dresdner is the preferred agent. The reason is because Dresdner shapes up better, in Stubbs’ view, “where full service levels and fees are concerned”.

MSS’ most valuable markets in Europe are Germany, France and the Netherlands, each of which is worth £1bn of cross-border trades, followed by Belgium, Austria, Italy and Ireland.